The closure of the South Grafton abattoir will impact on the Clarence Valley economy.
The closure of the South Grafton abattoir will impact on the Clarence Valley economy.

Times tough but outlook positive

NORTHERN Rivers businesses are continuing to experience the worst levels in business confidence in two years, according to the latest Northern Rivers NSW Business Chamber and Commonwealth Bank Business Conditions Survey.

More than 130 Northern Rivers businesses undertook the state-wide survey, which is conducted each quarter by the NSW Business Chamber.

Northern Rivers NSW Business Chamber regional manager John Murray said round one of the global financial crisis may be over, but local businesses were experiencing "a hard slog" when it came to confidence, profitability and growth.

"Unfortunately, some of the settings for growth are not in place," he said.

"While business reports an expectation of lower finance costs in coming months, this is more than offset by a deepening concern about access to finance.

"We are also seeing a concern about increasing wage rates and skill shortages during a time when employment growth has been flat.

"With continued volatility in world financial markets and a sense of drift domestically, I do not see any real turnaround in confidence in the near future.

"The message to business is keep working on the fundamentals - offer value to customers, reduce costs and work for growth. This is a tough time to be in business, particularly running a small business, and no one should underestimate what a 'tough slog' it is to run a business in these conditions.

"The message to government is tread carefully in terms of taxation and regulation during a time of uncertainty. There is a world of difference between being brave and foolhardy."

The Northern Rivers NSW Business Chamber and Commonwealth Bank NSW Business Conditions Survey found:

42% of businesses report that the current performance of the NSW economy was weaker than the previous quarter. This compares with 18% who said it was stronger. However expectations for the coming quarter saw a reversal of this figure with 37% of businesses expecting the economy to improve while 28% said it would weaken;

29% of businesses report that business conditions have declined in the current quarter compared to 15% who reported an improvement in conditions. Expectations for the next quarter are more positive with 29% expecting an improvement compared to 20% who expect a decline;

22% of businesses report increased sales this quarter and 37% report a decrease in sales. 42% of businesses expect sales revenue to increase in the coming quarter and 22% expect sales revenue to decrease in the coming quarter;

42% of businesses report a deterioration in profitability (compared to 17% who report an improvement), however, 41% expect an improvement in profitability in the coming quarter (compared to 27% who expect a deterioration), and;

12% of businesses report a tightening of access to finance and 10% expect a further tightening in the coming quarter.

Commonwealth Bank chief economist Michael Blythe said the uncertainty from global financial markets and the US debt ceiling stand-off had a significant impact on business and consumer confidence. However, surprisingly those uncertainties do not appear to have weighed on expectations for the quarter ahead.

"Expectations for the NSW economy, and for business conditions, both picked up, despite global growth fears and actual conditions turning out to be weaker than expected in the September quarter," he said.

"Though looking across the regions, the lift in expected conditions looks to be concentrated in the 'Rest of NSW' (outside of Sydney, the Hunter and the Illawarra), perhaps reflecting some of the flow through from last year's strong crop harvests and high agricultural commodity prices.

"Firms are expecting weaker export sales - possibly on account of the high Australian dollar (until recent weakness) - but total sales revenues are expected to increase.

"Consistent with the increase in overall activity, albeit domestically (rather than export) driven, a slightly larger proportion of NSW firms are expecting to increase employment. More important for the health of the labour market and consumer spending is the expected increase in hours worked by employees over the coming quarter.

"While firms are expecting to increase sales, and increase their demand for labour, investment intentions look to have weakened."

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